Despite the pandemic, personal wealth and preferences have led to a growth in the luxury segment of real estate
The year 2021 began on a positive note with the beginning of the large-scale vaccination drive against Covid-19. The development signals the prospects of economic stability that augurs well for the growth across sectors, including real estate. The increase in the number of HNIs, UHNIs, and NRIs, the desire for an Avante Garde lifestyle, and the steady rise of disposable incomes have fuelled the growth of luxury real estate in the past decade.
Home loans or the economic scenario are not the deciding factors for this segment. Instead, it is the personal wealth and preferences that determine the growth of the luxury segment. Hence it has emerged somewhat resilient to economic upheavals. An Anarock report highlighted that after demonetisation, the new luxury supply increased by 40 per cent to 7,350 units across the top 7 cities in the first half of 2018.
The forecast suggests that the post-pandemic scenario will be no different as NRIs, HNIs, UHNIs and corporate professionals at the top rung of the ladder will be driving the demand for luxury housing.
The traditional perception of real estate is that it is a safe and lucrative investment asset. The pandemic resulted in reaffirmation that real estate is a stable asset amid diminishing lustre in alternative asset classes such as stock market or mutual funds. NRIs are increasingly investing in Indian real estate to ensure security and hedge against economic uncertainties.
In India, the extended work from home has highlighted the need for spacious and self-sufficient homes with unique workstations. The segment with income at disposal is now investing in weekend homes or in projects located in remote areas of the city owing to the need to break the monotony of work from home.
Moreover, concepts such as 'staycation' are gaining currency to unwind and rejuvenate from the hectic lifestyle. It is noteworthy that despite economic uncertainty, their sophistication benchmarks remain the same for the luxury audience.
With geography being no longer a constraint, Tier 2 and Tier 3 towns are witnessing a surge in demand. The relative affordability, provision for clean air and tranquillity, and infrastructural developments have made these cities attractive for real estate investment. Hence picturesque locations on the outskirts of cities with excellent connectivity and state-of-the-art amenities are increasingly being preferred by homebuyers.
A focus on health, hygiene, and wellness imply gated communities with state-of-the-art surveillance and robust facility management will emerge as sought-after offerings in the luxury housing segment. With consumers willing to go the extra mile for health and safety, developers with a sound track record will have an advantage over others.
Covid has also accelerated digitisation even in real estate. Technologies such as BIM, Virtual Reality, Internet of Things will be key to maximise efficiency and enhance the customer experience. Amidst cut-throat competition and shrinking customer loyalties, customer centricity and innovation will be the key for developers to maintain their relevance.
The government push towards the sector is evident from the slew of initiatives such as the Emergency Credit Line Guarantee Scheme (ECLGS) and the increasing differential between circle rate and agreement value from 10 per cent to 20 per cent for income tax relief, recommending states to reduce stamp duty. All these measures have boosted the residential segment and bolstered prospects towards rapid recovery. During the Diwali season of 2020, NCR witnessed a 38 per cent Q-o-Q increase in sales. In Gurugram alone, the housing sales were worth Rs 1,371 crore in the third quarter of 2020 compared to sales worth Rs 467 crore in Q2 2020.
The infrastructural developments propel various benefits for the long run. For instance, the construction of the Delhi-Mumbai Industrial Corridor and IT parks will generate employment. Which, in retrospect, will lead to migration of the workforce, and fuel the growth of the residential segment. It will also push up prices, and a moderate price correction of 1-2 per cent is likely to be witnessed in the luxury housing segment.
The real estate segment will be riding high on the wave of economic stability, and as a result, luxury housing is looking at a bright future in 2021.
The author is Director, Goyal and Company
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